How Gov. Walz can help give Minnesota’s businesses some certainty
This week, I have returned to the point that a lack of certainty is hurting Minnesota’s businesses. To protect our businesses as much as we can, we need to reduce uncertainty as much as we can.
The choice isn’t ‘shut ’em all down’ vs ‘open ’em all up’
This doesn’t mean going back to exactly where we were. When you see that states and countries without measures like Minnesota’s have also suffered grave economic damage, it is clear that some – possibly a lot – of the economic shock we are currently experiencing is derived from Covid-19 itself and not the responses to it. If state government had done nothing, this would still have been bad. Indeed, it might have been worse.
But we are now some way into our battle with Covid-19. We know more about it. We have a clearer – though still far from unimpaired – view of how this will play out. This offers us a path forward which eschews the false dichotomy of ‘shut ’em all down’ versus ‘open ’em all up’.
A path back to openness
Covid-19 doesn’t work to a calendar so neither should the response to it. Saying we will do X by Y date without any reference to the situation with the disease makes no sense at all. But what Gov. Walz could and should do is set out a set of binding benchmarks to trigger further opening of the state’s economy based on verifiable progress in fighting Covid-19.
One potential measure would be new cases. I think this would be mistaken.
We see a lot of reporting about how states are seeing their cases surge. What we usually see below the headline is that testing is also surging. When you only have a limited number of tests you test people you suspect are sick and they are more likely to be so. When you ramp up testing you start picking up marginal cases who might well have been asymptomatic and never known they were infected without the test. The number of cases detected might be surging, but that doesn’t necessarily mean that the actual number of cases is.
A more useful measure, it seems to me, is hospitalization. That seems a reliable measure of acute cases.
Here, Minnesota’s ICU usage is nowhere near where the models have said it would be. On March 25th, Gov. Walz said:
We can say with 95 percent confidence that we are going to need a minimum of 3,000 beds starting in the middle of May. And that could be 3,000 beds as far out as the middle of July, depending on what we do social distancing-wise, and it could go higher.
His policy response was based very largely on ‘flattening the curve’ and pushing it back so that the peak of ICU useage would be reduced and come later, giving us more time to prepare. On that score we have had considerable success. According to the Department of Health, there are currently 545 Minnesotans hospitalized with Covid-19 of whom 229 are in intensive care. True, this is a peak, but as the figure below shows, not much of one.
We could give business some certainty, and give Minnesotans something to easily verify, if we made further opening of the economy contingent on this staying low, either as an absolute number or as a share of capacity. We currently have the capacity to handle our Covid-19 caseload reasonably easily. If this changes, we can twiddle the knobs back and reimpose tighter restrictions.
The poisonous and unenlightening argument between ‘shut ’em all downers’ and ‘open ’em all uppers’ helps nobody except for the participants themselves who get to signal their virtue on social media. There is space for a pragmatic way forward that uses continuous assessment to balance risks and rewards.
John Phelan is an economist at the Center of the American Experiment.